WHY LUXURY BRANDS SHOULD CELEBRATE THE PREOWNED BOOM
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WHY LUXURY BRANDS
SHOULD CELEBRATE THE
PREOWNED BOOM
By Olivier Abtan, Patrick Ducasse, Lucie Finet, Charles Gardet, Maëlle Gasc, and Sophie
Salaire
L uxury goods manufacturers have
much to gain by encouraging and
participating in the fast-growing luxury
In addition, a thriving resale market makes
the luxury industry more sustainable—and
more popular with environmentally aware
resale market. Although many manufac millennials—by supporting a circular lux
turers once viewed this market as an ury economy. Brands that go further and
unattractive niche, a recent BCG survey actively collaborate with the preowned
reveals that it has found new life through market can secure a number of previously
the online channel and now offers a power- unforeseen benefits, including the ability
ful opportunity for luxury brands to boost to connect with their customers in an inno-
their image and expand their customer vative way.
base.
The secondary market has always been a A Boom in Resale
steppingstone into the luxury world for The secondary market for luxury goods has
customers who don’t have access to the pri- always existed in the shadow of the pri
mary market. Online sales have accelerat- mary market, but now it’s moving into the
ed this effect, as more and more customers spotlight, becoming one of the fastest-
who may one day become primary-market growing areas of luxury. This market niche
luxury clients discover that it offers an is expected to grow from an estimated $25
avenue to goods they didn’t think they billion in revenues in 2018 to around $36
could afford. These resale customers typi- billion in 2021, increasing by an average of
cally are not primary-market buyers—and 12% per annum and boosting its share of
therefore tend not to be secondhand sell- total personal luxury goods to around 9%,
ers. Instead, sellers are usually firsthand according to the 2019 BCG-Altagamma
buyers who use resale to get money back, True-Luxury Global Consumer Insight
which they can then reinvest in new, full- study, which surveyed more than 12,000
priced luxury products. consumers in ten countries. The primaryluxury market, in contrast, is expected to developing quickly. The resale market in
grow more slowly over the same period, at China is emerging steadily, too, although it
around 3% per annum. is not yet well structured and no large play-
ers have appeared.
Much of the growth in resale will come
from online platforms, which currently gen- In terms of generational differences, young-
erate around 25% of global secondhand er luxury consumers are the largest partici-
luxury-market sales, according to BCG re- pants in the secondhand market, with 54%
search. Small, independent stores that of Generation Z and 48% of millennial lux-
worked on consignment once dominated ury customers buying preowned goods. In
the resale market—and we expect this ma- contrast, just 38% of Generation X luxury
ture offline retail channel to remain highly customers and 35% of Baby Boomer luxury
fragmented, with slow growth for indepen- customers buy secondhand.
dent stores, which tend to lack a luxury
look and feel.
Primary Growth Engines
In sharp contrast to that sales model, online Both an October 2018 BCG survey of 1,005
retailers are concentrated and organized, Vestiaire Collective customers and the 2019
offering large catalogs of goods, price trans- BCG-Altagamma survey highlight four ma-
parency, home delivery, and even repairs to jor factors behind the growth in luxury re-
ensure that products are in good condition. sale: price accessibility, the increasing pro-
Further fueling growth, a number of new fessionalization and concentration of the
specialist online players are emerging, and secondhand market, changing consumer
generalist online platforms are expanding preferences, and access to a broad selection
to include luxury goods. of products.
Among individual secondhand luxury seg- Price Accessibility
ments, leather goods such as handbags are The first major growth engine behind in-
extremely popular, as they are an aspira- creasing secondhand sales is the ability of
tional product for first-time buyers, easy to customers to gain access to luxury items at
buy online, and yet relatively scarce in the affordable prices. Buying and selling in the
traditional offline retail channel. Most first- preowned market allows these consumers
hand luxury goods companies have a vest- to increase their disposable income by lim-
ed interest in this category because leather iting their total cost of ownership (TCO). In
goods are typically their primary focus— fact, around 96% of buyers in the BCG-
and in many cases account for the bulk of Vestiaire Collective survey said that one
their sales. The watches and jewelry seg- reason they purchase secondhand items is
ment is also well developed. Meanwhile, because they are looking for good deals.
clothing and shoes make up a relatively (See Exhibit 1.)
small proportion of today’s luxury resale
items, as their potential is capped by the Growing Professionalization and
typical barriers to online purchase of such Concentration
goods: the inability to try them on, the Traditional brick-and-mortar luxury resale
wide range of sizes, and, therefore, the risk includes very few players of significant
that they won’t fit. size. Instead, the market consists largely of
a long tail of small businesses that focus on
Looking across geographies, we find that a specific product category or geographic
resale is a global phenomenon. Its presence footprint.
is particularly strong in the US, where 50%
of luxury customers—defined as those who Online resale platforms for luxury goods
have purchased a luxury item in the previ- have won over consumers by offering far
ous 12 months—participate in the resale greater brand selection and product assort-
market, according to the BCG-Altagamma ment. In addition, each platform has devel-
survey, and in Europe, where the market is oped its own services and approach, with
Boston Consulting Group X Vestiaire Collective 2Exhibit 1 | Customers Say the Preowned Market’s Chief Appeal Is Quality Products at Affordable Prices
“To what extent do you agree with the following statements when buying secondhand
luxury and designer fashion items?”
% of respondents
1 1
I look for good deals/good value for money 82 14 3
I buy items I can’t afford full price 45 27 16 7 6
I find a large choice of items and brands 49 34 12 32
I find unique pieces to enhance my style 41 32 20 5 2
I look for sold-out items/limited editions 35 27 21 9 8
Strongly agree Slightly disagree
Slightly agree Strongly disagree
Neither agree nor disagree
Source: BCG survey of Vestiaire Collective customers, October 2018; 1,005 respondents.
Note: Because of rounding, the percentages shown for a survey response may not add up to 100%.
specific offerings that include product au- Today, consumers—especially millennials
thenticity and curation (Vestiaire Collective, and Generation Z, the market’s largest
The RealReal); consignment, at-home pick- participants—tend to care more about sus-
up, photos, and storage (The RealReal, Ves- tainability and responsible consumption
tiaire Collective); and category expertise than did prior generations. In our BCG-
(StockX for sneakers, Chrono24 for watch- Altagamma study, 59% of luxury customers
es). Many have upgraded the buyer experi- in both the primary and secondary markets
ence to premium standards, providing web- said that the issue of sustainability influ-
sites with a luxurious look and feel. Others ences their purchasing behavior, while 17%
are creating offline expansions through of customers in the secondhand market
brick-and-mortar stores. The RealReal and said that they purchase preowned items
Rebag, for example, have opened a few because they consider doing so to be “truly
physical stores, while Vestiaire Collective sustainable behavior.” Our survey of Vesti-
has opened pop-up stores at large retailers aire Collective customers yielded similar
such as Selfridges and Le Bon Marché. data, with more than 70% of respondents
saying that they try to shop ethically and
The willingness of these online resellers to 13% saying that sustainability is extremely
grow and professionalize their offers has important to them. Of those that shop ethi-
not only attracted buyers and sellers into cally, 57% identified environmental impact
the space, but also drawn sizable venture as their primary concern.
capital and equity investments, such as the
more than $280 million raised in 2018 by Access to a Broad Selection of
The RealReal—a company that went on to Products
raise $300 million in an IPO in June 2019. The preowned market is also growing
(See the sidebar.) As such investments con- quickly because it offers customers a large
tinue, they create barriers to entry, boost- selection of products. Beyond vintage items
ing market concentration and establishing and items made available from past luxury
a few clear winners as a result. collections at affordable prices, two types
of items are especially popular on the re-
Changing Consumer Preferences sale market: rare or iconic items, including
Another source of growth in the preowned limited editions, that suffer from scarcity in
market is shifting consumer preferences. the firsthand sales network; and collabora-
Boston Consulting Group X Vestiaire Collective 3THE REALREAL
The RealReal (TRR) was the first luxury The company has experienced strong
reseller to go public, in June 2019. The growth since its founding, generating
platform, founded by e-commerce $207.4 million in revenues in 2018, up
entrepreneur Julie Wainwright in 2011, 55% over 2017, on $711.0 million in
raised more than $350 million in funding gross merchandise value. The number of
before taking the company public. Priced orders reached 1.6 million in 2018, up
at $20 a share, the IPO then raised $300 42% year-on-year.
million.
tions. Resale prices for the former typically to the primary luxury market or don’t want
build in a premium that is highly correlated to purchase new products at full price. In
with the items’ desirability and scarcity, fact, 71% of the preowned item buyers we
sometimes making them more expensive surveyed lean toward items and brands that
than the same items sold firsthand. they can’t afford firsthand.
Increasingly, luxury brands collaborate with The secondhand market is therefore a pow-
artists or other brands. In fact, awareness erful way for luxury brands to connect
of such collaborations reached around 90% with—and anchor their brand in the minds
of survey participants in 2018, and 50% of of—buyers who may become primary cus-
them had actually purchased collaborations tomers in the future. Social media interest
or special editions. Such purchases are most generated around the preowned market
common among Chinese customers (62% can help, too, by publicizing high-quality
of those surveyed) and younger genera- products and brands through the com-
tions of shoppers (67% of Generation Z cus- ments and feedback that market partici-
tomers and 60% of millennial customers). pants provide and by creating transparency
around the products in most demand.
Of the buyers we surveyed, 62% said that
they find the preowned market attractive As buyers of secondhand luxury items
today because they are looking for sold- ature, their purchasing power tends to in-
m
out items or limited editions (“strongly crease, giving them the financial resources
agree” or “slightly agree”), and 83% point- they need to shift to the primary market.
ed to the large choice of items and brands When they do, they will already be edu
available there. cated with regard to a given brand or
brands and may remain loyal after the
transition. Among survey participants, 62%
Reasons to Support Preowned said that their first purchase of a brand
Luxury players might understandably re- they currently like was secondhand on Ves-
gard a growing preowned market as a tiaire Collective; and within that 62%, al-
threat. However, the secondhand market most all of them said that they would con-
has much to offer the luxury industry, in- sider buying that brand again. Although
cluding serving as a recruiting mechanism 43% said that they would probably stick to
into the luxury world, encouraging primary- secondhand, the remaining 57% would
market buyers to purchase additional pre- either definitely buy or consider buying the
mium items in light of their lower TCO, item firsthand—making them very good
and boosting sustainability. prospects for the firsthand market.
Preowned Purchases Are a Secondhand Sellers Are Firsthand
Recruiting Mechanism Buyers
Buyers of preowned luxury items are usual- Secondhand sellers typically use resale to
ly consumers who either don’t have access regain some of the money they spent on
Boston Consulting Group X Vestiaire Collective 4firsthand purchases—often so they can re- by around 20–30% each,” according to the
invest in new, full-priced luxury products. environmental action group WRAP.
Of the sellers we surveyed, 32% said that
their primary reason for selling was to be Luxury companies that support sustain-
able to purchase new firsthand goods. Most ability can take pride in participating in a
sellers of preowned items buy very little in more responsible ecosystem, and they will
the secondhand market. For example, 70% ultimately benefit from such positioning.
of all preowned sales on the Vestiaire Col- This is especially true in view of the im-
lective platform are generated by sellers portance of sustainability to young con-
who rarely purchase secondhand (less than sumers today, as illustrated by initiatives
20% of their transactions are purchases). such as Stella McCartney’s sustainability
And these purchases in aggregate represent partnership with The RealReal, along with
only 3% of all transactions made on the the Bash and SMCP partnerships with Ves-
platform. tiaire Collective.
As reselling a luxury purchase becomes In contrast, behaviors such as stock de-
easier, primary luxury customers are even struction can backfire in the eyes of the
adjusting the way they buy. Some custom- younger generation, particularly when
ers are trading up and buying higher-ticket these customers are ready to shift to pri
firsthand items, in anticipation of the low- mary luxury. One European luxury goods
er TCO. Among survey respondents, in manufacturer experienced this firsthand,
fact, 44% said that they purchase more- when its customers discovered that it had
expensive luxury items than they would burned all of the prior year’s unsold prod-
have bought without a resale market. Oth- ucts. The company quickly announced a
er customers purchase more frequently, policy change, saying that henceforth it
investing approximately the same amount would take a more sustainable path.
on individual items overall, but buying
repeatedly as they free up their budgets by A more responsible industry sales ecosys-
reselling used items. Preowned sales clear- tem can also serve as a strong complement
ly boost these sellers’ purchasing power to and differentiator from the various ethi-
for new items and, therefore, create an cal and corporate social responsibility
opportunity for manufacturers to increase (CSR) initiatives that luxury players typi
primary-market sales, benefiting luxury cally pursue. And it meshes well with the
players. new Fashion Pact introduced by French
president Emmanuel Macron at this year’s
Preowned Boosts Sustainability in G7 summit—a set of objectives intended to
the Luxury World encourage the fashion industry to reduce
The preowned market extends the lifetime its environmental impact. So far, 32 com
of luxury products. Most products sold on panies, comprising roughly 150 brands,
preowned luxury platforms are of high have signed the pact, thereby committing
quality, with 62% of them unworn or scarce- to collective achievement of practical
ly worn (worn three to ten times), accord- objectives in three areas: stopping global
ing to our survey. warming, restoring biodiversity, and pre-
serving the oceans.
It also helps create a circular luxury econo-
my, a hot topic in the fashion industry to-
day. As Stella McCartney has said, “If every Collaboration Brings Benefits to
single second there’s a truckload of fast the Luxury Ecosystem
fashion being incinerated or landfilled, then Luxury players that actively support and
I’m a big, big believer in reusing that and collaborate with the preowned market can
[participating in] the circular economy.” garner even greater benefits. Brands can
And “extending the life of clothes by just actively collaborate in several ways. First,
nine extra months of active use would re- they can provide access to a resale service
duce carbon, waste, and waste footprints that helps buyers consume more sustain-
Boston Consulting Group X Vestiaire Collective 5Exhibit 2 | Benefits of Resale for Brands and Retailers
5. Integrated resale solutions
In-store drop off, resale button on website, etc.
4. Targeted marketing
Leverage resale platforms as new marketing/acquisition channel:
Targeted CRM, flagship store, exclusive offers, access to data, etc.
3. Resell
BENEFITS Brands and retailers Use money to buy Resale platforms
Offline and online new items (secondhand)
(firsthand)
3. Buy new
Increase frequency 37% use resale money to reinvest
of purchase and loyalty in firsthand, in-season luxury items
2. Resell
1. Purchase 44% purchase more-
Acquire firsthand expensive luxury items
new customers In-store or firsthand as they know
online purchase they can resell them
Secondhand
luxury sellers
Mostly firsthand Secondhand
Address luxury buyers
buyers
sustainability challenges Mostly buy brands
they could not
2. Discover and purchase firsthand afford firsthand 1. Purchase secondhand
Most would buy the same brand again; 57% 62% buy a brand for the first
Today’s benefits would consider firsthand for this purchase time on a resale platform
Future benefits
Source: Vestiaire Collective.
ably and supports the circular economy. primary market. Alternatively, they might
(See Exhibit 2.) Second, they can create interact with communities of engaged con-
unique or exclusive events and collabora- sumers to obtain feedback on products
tions that mix current and vintage trea- and brand positioning. Any active involve-
sures to celebrate a brand’s heritage. Third, ment would also contribute toward even-
they can reinforce the fight against counter tually converting clients to the primary
feiting. And fourth, they can work with re- market.
sale players to engage with a community of
advocates and prospective customers. All of these factors point toward the same
conclusion: brands that support the second
Such collaborations might enable luxury hand market—without fearing consumer
players to benefit from access to data on feedback or competition—are most likely
purchasing patterns, giving them a better to emerge as winners.
understanding of underlying trends, includ-
ing potentially collecting insights for the
About the Authors
Olivier Abtan is a managing director and partner in the Paris office of Boston Consulting Group. You may
contact him by email at abtan.olivier@bcg.com.
Patrick Ducasse is a managing director and senior partner in the firm’s Paris office. You may contact him
by email at ducasse.patrick@bcg.com.
Lucie Finet is head of growth for the Asia-Pacific region of Vestiaire Collective and is based in the compa-
ny’s Hong Kong office. You may contact her by email at Lucie.finet@vestiairecollective.com.
Charles Gardet is a principal in BCG’s Geneva office. You may contact him by email at gardet.charles@
bcg.com.
Boston Consulting Group X Vestiaire Collective 6Maëlle Gasc is the chief marketplace officer of Vestiaire Collective and is based in the company’s Paris
headquarters. You may contact her by email at Maelle.gasc@vestiairecollective.com.
Sophie Salaire is a lead knowledge analyst in BCG’s Paris office. You may contact her by email at salaire.
sophie@bcg.com.
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